Coverage change wrong

April 25, 2004

Dear Sir,

I read today in your paper that BF&M may cancel coverage for shore front properties considered to be at higher risk as a result of the Fabian experience, or else raise premiums in general across the board, the latter option claimed to be unfair to those in safer areas.

I have not read the annual report, but BF&M seems to be suggesting that there is an increased risk of Fabian repeats, and that they are not simply grasping a convenient opportunity to recover one-time losses and to ratchet up ongoing profitability. In actual fact, is there really anything new on the table that justifies higher premiums in aggregate, or indeed the cancellation of policies happily sold to many people for years?

Last year insurers and policyholders suffered a direct hit by the worst quadrant of a Category Three or Four hurricane from the worst direction, at the worst tide. This three-factor combination could only have been exceeded by a Category Five storm in the same conditions.

Nevertheless, Fabian appears to have conformed to the law of averages by arriving quite predictably in the decade it did. The last occasion a storm of this magnitude hit us was in 1926. In the interim there have been many less significant hurricanes, and some direct hits, but none raised the sea level or the breaking seas to the levels of Fabian or the winds to the levels of 1926.

These levels were not due to Fabian?s intensity, but to a combination of the other, actuarially predictable factors: The ten day, roughly broadside on approach towards the South Shore, the high tide, and the precise direct hit by Fabian?s most dangerous quadrant. Indeed, the equally powerful 1926 hurricane approached end-on to the Island from the southwest, minimising the surge effect, and giving us miles of wide western reef to protect the shoreline, rather than broadsiding us from the unprotected southeast.

The point of this is there is no immediate evidence that Fabian was more than an especially bad, but quite predictable, combination of events that could have occurred in 1926 but did not, due to the 1926 storm?s southwest line of approach. Every year there are usually two or three hurricanes of Fabian?s severity in the Atlantic and several lesser ones.

Two of the factors contributing to another Fabian event, intensity and tide condition, but not direction of approach (it was assumed for simplicity that each of the eight theoretical storms would approach one of each of eight points of the compass), have been calculated by the US Navy. This study was given to the local government and included in a 1991 report.

It says in essence that we should expect one Category Three, Four or Five direct hit (within 25 miles) once in every 56 years. This is actually pessimistic, as an approach from the northern semicircle has proven very rare, so it would be safe to assume that all approaches would be from the southern semicircle, the east, southeast and on around to the west.

As the 1926 event showed that hurricanes from the west and southwest have much less surge impact due to the extended reef and angle of the Island, at least of the estimate can therefore be considered as less serious concerns.

The ?once in 56 years? then becomes a Fabian once every 83 years. 1926 was 77 years prior to Fabian but even though 1926 was not so bad from a surge point of view, the US Navy meteorologists were very close, only six years off the mark. Theoretically then, we are looking at 2090 or thereabouts for another Fabian. This does not of course preclude a similar hit this year, 2004, but the laws of averages and probability make it virtually impossible. It would be like winning the lottery twice in a row ? possible perhaps ? but not likely and certainly no excuse for raising premiums.

Category Three, four and five frequencies, and the consequences of them, have therefore been remarkably predictable and must, or should have been, included in the actuarial calculations that produced the premium levels prior to Fabian. Therefore, the premium/claim ratio is undisturbed long term ? there has only been a short-term (and predictable) aberration or hit that reinsurance should cover if adequate, and a conservative view was taken regarding the Navy?s 2009, or 83 years out from 1926, prediction.

In any event, due to the clear predictability of the effects of an anticipated Fabian event on new building in more exposed areas, why were the insurers so anxious to sell windstorm cover to such homeowners over the years?

Looking back at the hurricane archives on the Internet, there is no evidence of any long-term change in hurricane intensity or frequency, only periodic variations due to fluctuation in Pacific water temperatures. There are predictions of increased frequency and intensity due to global warming.

When and if these materialise, insurers should have by now adjusted, if they believed those predictions valid, as these predictions have been around for some years. In any event, none of these predictions are new, so insurers should have similarly taken them all into account when calculating current premium levels.

In the meantime, there is no reason to raise premiums on existing properties as a result of Fabian, as Fabian clearly was expected about now, and should have been allowed for, and as conditions have not changed at all. Effectively, there is no new knowledge that argues that the undermining of some house on the foreshore was not perfectly predictable.

If an insurer surveyed the house and sold the owner cover previously, that cover should be respected, and continue on unaltered after the insurer has secured the undermining and repaired the building.

CYNIC

St. George?s

End the wordplay

April 22, 2004

Dear Sir,

It is 6.30 a.m., April 22, 2004, this early and I?ve already learned something new... ?Sophisticated Fraud?. I?ve heard of fraud at corporate level, bank fraud, fraud at Bermuda Housing Corp., even Immigration has fraudsters. Lets investigate this phrase called ?Sophisticated Fraud?. The word ?fraud? exists because people are conniving and deceitful. Does it become ?sophisticated fraud? because the crime is harder to detect? Once a person is convicted of fraud, it means they have successfully pulled the wool over the eyes of their superiors.

Now I ask, should the fraudsters get rewarded with an Oscar or prison time? Does this mean that management is exempt from accountability, for sleeping on the job? Should management be dismissed or put on probation for the same length of time it took them to detect the crime? When you start describing fraud as ?sophisticated? you are actually discriminating against the word ?fraud?. Here we go again, another form of discrimination.

Too much controversy surrounding one establishment. Time to act... put someone forward with a catchy phrase, convince the public it does exist, in order to camouflage the lack of hindsight of management and the lack of accountability down de road. Are the wheels of bureaucracy turning once again? Is this another form of ?fraud?. Egg on your face? Wipe it clean... put in place some, internal controls whereas fraudsters can be detected and stopped.... sooner rather than later.

How many of us was paid off years ago? Who has pocketed my money? Who has aided and abetted these fraudsters? Now lets sit back, relax and observe how far and how fast this famous phrase ?Sophisticated Fraud? can travel and how many managers will use it as a life line to secure their jobs. I wonder what words were used by the fraudsters to describe management?

F.C.W.

Pembroke

What will be next?

April 28, 2004

Dear Sir,

I would like to respond to ?Unequal?s? Letter to the Editor appearing April 28, 2004. Only a few words of observation to you Unequal ? spoken like a true atheist! Long may the Church rule! (and in case you are wondering, yes, I am a Roman Catholic and I am against gay marriages for the Bible tells me so!) What will Government see before them soon ? after the gay marriage gets approved ? some will probably look for human/animal marriages! What next!

A. MEDEIROS

Pembroke

Kudos for RG Magazine

April 29, 2004

Dear Sir,

I wanted to commend the RG Magazine for publishing an excellent magazine on ?Bermuda Roots?. As one of the librarians on the island, I can categorically state you have managed to capture important moments of our history. This particular issue will go a long way in assisting our students in researching the Bermuda of yesterday. A job well done to all involved with this publication. Thank you.

DAWN BURGESS

Teacher/Librarian

CedarBridge Academy